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Indian Oil Corporation (IOC), the country’s biggest oil marketing company, has told NDTV Profit that petrol prices may be hiked by the end of March.

"We will look at reviewing petrol price by end of March," Chairman and Managing Director of IOC RS Butola told NDTV Profit. However, a decision will be taken after considering the paying capability of the consumer, Butola added.

"We have told the government under recoveries are very high. This is beyond the ability of oil marketing companies to absorb," Butola said.

The government had decontrolled petrol price in June 2010 but diesel and domestic LPG are subsidised.

State-owned oil companies have been pushing for raising petrol prices since the assembly elections ended. Oil firms had last revised petrol prices on 1 December after which rates have not been changed because of Assembly elections in states like Uttar Pradesh.

Indian Oil, Bharat Petroleum and Hindustan Petroleum together have lost over Rs 2,000 crore since the last revision which was done at international gasoline price (the benchmark for deciding domestic retail rates) of $ 109 per barrel. Brent crude for May delivery was up 17 cents at $123.31 per barrel in London yesterday.

"We have asked for 100 percent reimbursement. If we are not given this, we will have to consider passing on the burden to consumers," Butola said.

The current under recovery, which is the gap between the local price of fuel and global prices, on petrol stands at Rs 6.43 per litre. OMCs currently lose Rs 14.73 a litre on diesel, Rs 30.10 a litre on kerosene and Rs 439.50 per LPG cylinder.
 
"Petrol prices will be dealt with independently by our ministry but before we instruct the oil companies we will have to take all matters like undue volatility in the world market into consideration," Oil minister S Jaipal Reddy told NDTV Profit.

An increase in fuel prices is necessary to cut down government’s subsidy payout as state-owned oil firms are projected to lose Rs 200,000 crore on selling fuel below cost next fiscal. As per present policy, the government will have to make good half of it by way of cash subsidy.

In the current fiscal, the government has provided Rs 65,000 crore in fuel subsidy, which it hopes to trim down to Rs 40,000 crore in 2012-13. It targets to bring down the subsidy bill to below 2% of GDP in FY13.